Delek Group in the first quarter: cash is moving up, but the test is getting harder

Delek Group opened 2026 with net profit of NIS 45 million attributable to shareholders, a small number relative to the scale of its assets, but that is not the figure that explains the quarter. The first quarter tests what was left open after the annual report: whether value in Leviathan, Ithaca and Isracard is actually moving up to the parent as cash, or remains mostly at the asset, investment and financing layers. The current answer is mixed, but sharper than before. On the positive side, NewMed Energy paid and declared distributions that represent roughly NIS 215 million for Delek, Ithaca paid Delek about NIS 302 million, and the parent ended the quarter with about NIS 1.4 billion of liquid resources after excluding the bond proceeds that were earmarked for early debt repayment. On the other side, the same quarter showed how dependent Leviathan still is on operating availability and security risk, how much capital the 21 BCM expansion requires before cash flow, and how Isracard adds a financial engine that is not the same as free cash for the parent. That makes Delek Group less a quarterly earnings story and more a holding company trying to convert energy and financial assets into recurring distribution capacity. In the next reports, the market will need to see stable Leviathan production after the restart, continued distributions from Ithaca and NewMed, and control over capital and credit risk at Isracard.

The company is now measured by cash movement, not quarterly earnings

Delek Group is now a holding company with two main engines: energy and finance. The energy exposure sits in two different layers. NewMed Energy holds Leviathan and the East Mediterranean expansion path, while Ithaca holds producing and development assets in the North Sea. Finance entered the picture only after the acquisition of the controlling stake in Isracard in July 2025, so in the first quarter of 2026 it is no longer a theoretical addition but a consolidated activity in the group accounts.

In the previous annual analysis, the test was whether 2026 would prove that value can move up to the parent rather than remain mostly on paper. The first quarter gives an initial answer: yes, cash is starting to move up, but it comes alongside large uses of cash. Profit attributable to shareholders was NIS 45 million, but beneath it were three very different layers: Leviathan was hit by a production shutdown and a dry hole, Ithaca continued to generate a dividend, and Isracard contributed profit but must be measured like a regulated credit institution.

That distinction matters because Delek is not priced only through a consolidated income statement. It is priced on confidence that the parent can receive dividends, refinance debt, distribute to shareholders, and still leave enough flexibility for long-cycle investments. This is a cash-return and leverage machine, not only a growth machine.

Leviathan restarted, but the quarter exposed the availability dependency

The main event at Leviathan is not only the decline in gas sales, but the reason for it. On February 28, 2026, activity at the Leviathan platform was stopped by order of the Minister of Energy for security reasons, and regular production resumed on April 2, 2026. In one quarter, Leviathan gas sales fell from 2.9 BCM to 1.9 BCM, and NewMed Energy revenue from gas and oil sales net of royalties fell from $250 million to $143 million. Operating profit in the activity fell from $177 million to only $3 million.

That does not mean Leviathan has lost its economics. The opposite is true: during the quarter the third subsea pipeline and platform upgrades were completed, and the reported proven maximum production capability is about 1,530 MMSCF per day, or about 15.8 BCM per year. In addition, in January 2026 the Leviathan partners reached final investment decision for the first stage of the expansion, targeting production capacity of up to about 21 BCM per year, with first gas expected in the second half of 2029 and a total budget of about $2.36 billion on a 100% basis, of which NewMed Energy's share is about $1.07 billion.

The point that can get lost behind the expansion headline is that value arrives at two speeds. The roughly 14 BCM capacity is already relevant after completion of the third pipeline, and proven capacity of 15.8 BCM improves near-term visibility. The expansion to 21 BCM is a different story: it requires heavy investment, engineering coordination, sales agreements, regulation and time until 2029.

The new agreement signed by NewMed Energy and Ratio with Dalia Energy strengthens the commercial side of the expansion, but it does not shorten the cash path. The agreement is intended to supply gas to two new power generation facilities, with annual quantities of about 1.3 BCM rising later to about 1.7 BCM, and estimated total revenue of about $6.7 billion on a 100% basis, of which about $5 billion is NewMed Energy's share. But supply is expected to begin only on January 1, 2030, the agreement is subject to Competition Authority and financing approvals, and the Ashkol mechanism includes rights to reduce quantities if financing for the facility is not completed by the set dates. This is a contract that supports the Leviathan demand story, not an event that replaces the 2026 production and distribution test.

Ithaca distributes, Isracard is still building the credit engine

Ithaca shows the difference between asset value and cash reaching Delek more clearly than any other layer. Net profit attributable to Ithaca shareholders was $100 million in the quarter, and Delek Group's share of Ithaca profit contributed about NIS 157 million to the group's results. The more important contribution at parent level is the dividend: about $200 million paid in April, of which about $101 million, or NIS 302 million, was Delek's share. That is stronger cash evidence than accounting profit.

There is still friction. Average production was almost stable at 126 thousand barrels of oil equivalent per day, and revenue rose to $882 million, but EBITDAX fell to $571 million from $653 million. Ithaca is also advancing projects such as Rosebank, Cambo, Tornado and Fotla, and in April an equipment incident caused a drilling rig to be off-hire for an estimated three to four months. Adjusted net debt to adjusted EBITDAX of 0.54x and liquidity of $1.599 billion leave Ithaca relatively comfortable, but Delek needs to see not only profit. It needs a repeatable dividend that does not weaken the future production base.

Isracard adds a different engine. In the first quarter, the financial activity contributed NIS 897 million of revenue and NIS 60 million of profit to the group, and Delek's share of that profit contributed NIS 24 million to shareholders of the group. But this is not simple parent cash. Isracard's standalone revenue barely grew, at NIS 850 million versus NIS 846 million, and net profit excluding one-time effects fell to NIS 45 million from NIS 55 million.

Against that, the credit book keeps expanding: consumer credit rose 17.3% from March 2025, and commercial credit rose 27.6%. Credit-loss expenses in Delek's financial activity were NIS 71 million, and problematic credit at Isracard was NIS 529 million, compared with NIS 449 million in March 2025 and almost unchanged from year-end 2025. Isracard's Tier 1 capital ratio was 10.7%, above the minimum requirement, but the Frequent Flyer Club agreement and the non-binding MOU to acquire Bank Esh Israel add investment, integration and a capital test. Delek Group received a new earnings engine, but it requires good underwriting and regulatory capital before it can support the parent.

The parent is distributing quickly, so four near-term proofs will decide

When the thesis is financing flexibility, the right measure is all-in cash flexibility: how much cash is really left after debt repayments, proceeds already earmarked for a specific use, dividends, investments and known commitments. On that basis Delek still has room to operate, but less than the headline NIS 2.9 billion of cash and short-term investments in the general activity suggests.

As of March 31, 2026, net financial debt of the company and headquarters companies was NIS 3.722 billion. That number includes a temporary position: at the end of March Delek completed a new Series 42 bond issue with net proceeds of about NIS 1.011 billion, and the proceeds were used in April for full early redemption of Series 39. Therefore parent-level cash excluding the issue proceeds was about NIS 900 million, and together with unused credit lines, liquid resources were about NIS 1.4 billion.

The positive side is that the company used an accessible debt market to reduce maturity pressure. The maturity schedule shows that 2026 repayments fell from about NIS 1.466 billion to about NIS 369 million after the early redemption of Series 39. Covenant room is also wide: equity was NIS 9.381 billion and the solo equity-to-balance-sheet ratio was 59%, versus distribution thresholds of NIS 3.5 billion of equity and a 22% solo ratio.

The part that requires discipline is the pace of cash use. Delek paid a dividend of about NIS 250 million in April, and on May 19, 2026 decided on another distribution of about NIS 250 million to be paid in June. Against that are clear cash sources from holdings: about NIS 119 million from the NewMed Energy distribution in March, about NIS 302 million from the Ithaca dividend in April, and about NIS 96 million from another NewMed Energy distribution expected in June. Those amounts are similar in size to Delek's two distributions, but this is not proof of routine, unlimited payout capacity.

That makes 2026 a proof year for Delek. Not a proof year for whether the assets exist, but whether together they can fund debt, dividends and investment without forcing the company to replace cash flow with additional debt issuance. The next proofs are clear: Leviathan has to return to a stable production pace after April, the new agreements have to progress without becoming a financing burden, Ithaca has to maintain dividends while advancing projects, and Isracard has to show that credit growth is not running ahead of portfolio quality and capital. If those four items move together, the weak bottom-line quarter will look like quarterly noise. If one breaks, the market will go back to measuring Delek as a leveraged holding company with good assets, but less convenient access to their cash.